Chi, chi, chi, change
Turn around and face the strange
ch-ch-changes
I don't want to be richer
— David Bowie
David Bowie may not have wanted to get richer, but most of us do, and the annual changes to Social Security will help to some degree. Here are some important things to know about Social Security changes for 2025.
Image source: Getty Images.
1. Social Security benefits are increasing through COLA.
What's especially great about Social Security is that your benefits tend to increase each year, thanks to: Cost of Living Adjustment (COLA). Without that feature, it would be impossible to keep up with inflation, and benefits would lose a lot of purchasing power over time. The latest COLA, which takes effect in 2025, is 2.5%, slightly lower than the average annual increase of 2.6% over the past 20 years.
2. The upper limit of monthly benefits is also increasing.
As of September, the average monthly Social Security retirement benefit was $1,922, or about $23,000 annually. There aren't that many, right? Fortunately, if you earned above-average income during your working years, you can receive above-average benefits.
The new monthly benefit cap for 2025 is $5,108 (about $61,300 annually), up from $4,873 in 2024. I know that's what it sounds like, but wait a minute. Unfortunately, very few people qualify. Because to qualify, you'll need to:
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You must earn at least the maximum income that will be considered for Social Security calculations. This will be $176,100 in 2025, which is just as high in past years.
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Earn at least that maximum amount for at least 35 years.
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Delay receiving benefits until age 70.
Even if you don't get the maximum benefit, know that there is something you can do. to increase future profits. Choosing the best age to claim benefits is one thing, and for most people, the best age to claim benefits is 70.
3. More income is subject to Social Security taxes
What you may not realize is that 6.2% of your salary is deducted for Social Security (another 1.45% is deducted for Social Security). medicare), your employer will add the same amount. These tax rates will remain the same in 2025, but the amount of income taxed for Social Security purposes will change. Price increases from $168,600 to $176,100.
So if you earn $75,000 or $176,100, your entire income is taxable. However, if you earn $1,176,100, only $176,100 will be taxed in Social Security contributions, leaving $1 million untaxed.
4. Revenue limits are rising
Another number that increases is the earnings limit. If you haven't received it yet, full retirement age (FRA) If you are working while collecting Social Security, you can only earn a certain amount of money before Uncle Sam starts withholding a portion of your Social Security benefits. (Full retirement age is 66 or 67 for most people, but 67 for those born after 1960.)
That cap was $22,500 in 2024 and rises to $23,400 in 2025. This is for people who don't reach FRA in 2025, who will be stripped of $1 in benefits for every $2 they earn above the limit. For those who reach this goal, the income limit is even larger, increasing from $59,520 to $62,160 in 2024. Additionally, withholding tax is $1 for every $3 of excess profits.
It may sound terrible, but know that the money withheld will eventually come back to you in the form of increased benefits in the future.
5. Disability benefits are increasing
The Social Security Administration (SSA) estimates that average monthly benefits for disabled workers, their spouses, and children will range from $2,757 to $2,826 in 2025. For all disabled workers, that increases from $1,542 to $1,580.
6. Benefits for widows, widowers, and left-behind children are increasing.
Widows, widowers, and surviving minors can also receive Social Security benefits, and the SSA estimates such benefits to be between $1,788 and $1,832 for an elderly widow or widower . A widowed mother and two children collect an average of $3,669 to $3,761 per month.
7. Medicare Part B premiums are also likely to increase.
Let's go back to Medicare now. Retirees typically have their Medicare Part B premiums automatically deducted from their Social Security benefits. In 2024, that monthly amount will be $174.70. The 2025 amount is unknown at the time of this writing, but some predict it will rise to $185 in 2025.
Social Security benefits are essential for most retirees, and they keep millions of people above the poverty line. Therefore, it's wise to stay on top of Social Security changes and optimize. retirement planning.
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